procter & gamble is lowering full-year earnings forecast, citing softness in developed markets. we're hearing the same thing on pepsi. an agreement to form a coalition government in greece could come within the next 24 hours, according to the head of the democratic left party. the new democracy party and socialist pasok party. apple facing off with google in a chicago courtroom today and the ongoing patent dispute between the two, a judge will

would be a request barring sales of motorola's unit. >> do not apologize. love means never having to say you're sorry. do you remember what that's from? "love story." >> i'll try to remember that. traders are waiting to hear if there's more easing on the way to help boost the economy. that announcement second around 12:30 eastern. we of course will bring you that. joining us to give you a quick preview of what people are thinking, peter, what's baked into the cake? what will disappoint and what will give us the up side here? >> pretty mch everyone is expecting them to keep the quantitative easing or minimum but remain with the operation twist so they don't expand their balance sheet too much but they continue to say they're doing

all they can. it's going to get pretty political for the fed going forward. we're talking about all the economic malaise. if their statement continues we still have bullets left and we can continue to do more, at what point does someone say why haven't you been doing it and what are you waiting for? i think they're going to be amazingly politically correct. >> as you're running the numbers this morning, how would you position yourself into today's market? >> i'm going to look for disappointment in the longer end of the curve. ten-year note at 1.63 is an amazingly low rate and i can't imagine that there's fed officials or anyone out there thinking if we can get that down to 1.48 made we'd stimulate this economy. >> there you go. >> i think it pie in the sky at this point. >> i think people have been buying it back there, a lot of it is speculative, a lot of it is hedge fund buying, people

trying to figure out how to make a trade. i thi they'll be disappointed if they don't get a definitive statement out of the fed. you could see 1.74 on the ten-year on a real washout. >> jack -- >> twist be twist and back and forth from 1.6 to 1.7, it's going to have no impact on the economy. it might be good for traders and how they can play it but it's not going to change the economy. >> i can imagine. i can't imagine ge, the greatest user of capital out there would be saying at 1.61 we're going to be able to do a lot more than we can do at 1.69. >> right on. >> peter, if you're a trader, it's a big deal today. if you're a ceo today -- >> yawn. yawn. >> nothing? >> yawn. >> does the fed pay too much attention to the market's reaction at this point? there's this idea the market can't be disappointed so the fed has to respond. >> that's one step above my pay

grade. >> come on, you're at the highest pay grade. >> i can say whether it's 1.61 or 1.71 matters not an iota to a ceo. if you got rid of the epa administrator and rid of the osha administrator and got rid of the secretary of labor and put new people in, that would be a huge day for business and business would change. >> i don't think we're going to hear about that at 12:30. >> you were talking about the 1980 phenomenon and comparing it to the 2000 recession. in 1981 my father's company didn't have anything in computers, didn't have anything in production and didn't use them. by '83 they borrowed money from the banks and put in all kinds of computer systems that were now available. when you look at the recovering cost system and all the things they did in the 80s to help

people borrow money and use the technology comingline, it helps to explain the huge amount of lack of recovery and the recovery we've seen prior. >> that's sort of a depressing scenario you're painting. so it's not morning in america. what is it being like early afternoon in america? >> i said the industrial revolution is over and up got mad at me. >> you said china -- you said we've already passed the baton to china. they mack $9,000,000 an hour. >> driverless cars, joe, will save the country. >> driverless cars. >> oh, god. you're a whacko sometimes, peter. >> ie'm always a step ahead. >> in three years you'll be saying you're right again. >> i've never said you're right the first time so i can't say you're right again. >> i'm hold mieg breath, joe.

>> i'll ask for mr. blue when you come up. coming up, good news at the pump once again. later, the fed decision. we'll get excellent insight from former fed governor larry myer. >> tomorrow on "squawk box," former council of economic adviser chair ed lazear joins us as guest host. and we are live from the morningstar conference with some of the best fund managers money can buy. that's tomorrow on "squawk box" starting at 6:00 a.m. eastern. powerful and secure cloud. y that cloud is in the network, so it can deliver all the power of the network itself. bringing people together to develop the best ideas -- and providing the apps and computing power to make new ideas real. it's the cloud from at&t. with new ways to work together, business works better. ♪

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well well come back to "squawk." >> gas prices are dropping. analyst say it's due to a weak end economy and of course the oil prices. and the miami heat beat the thunder 104-98 to take a 3-1 lead in the best of seven title. game five thursday night. have people come back from a 3-1?

>> i've watched every game. fabulous games. and they're so close. just one play. >> it happened before, people have come -- 31 times. i don't know, lebron, do you think? i don't know. you'd put money on the heat, wouldn't you? >> westbrook was awesome until the end. and duran-james is having a balt of all time. >> he can talk business, he can talk sports. >> he's a huge sports guy. you were in cincinnati so you know the reds are hot. >> they took three from the mets and they didn't go against r.a. dickey. >> they did lose last night. they lost two straight. what's going on with the red sox? >> that's another subject. >> you going to cry? >> not on set. >> i'll save you, jack. if you have comments or questions about anything you see here on squawk, e-mail

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welcome back welcome back to "squawk box," everybody. we just want to quickly mention that the greek socialist party leader venizelos says they have formed a coalition government. >> and reuter says moves involving people of ten groups of more have been taking place at the blackberry maker. >> and moody's has raided turkey's rating by one notch. it's one level below investment grade. moody is citing significant improvement in turkey's public finances. and investors have snapped up

germany's two-year debt. i just want to keep my money, just give it back to me. don't worry about gain on our capital. >> we'll get more thoughts from jack welch, the founder of jack welch management at strayer university. i want to talk about jamie dimon. he's in the news. you've written about him with your wife. he was on the hill yesterday as he was a week ago. i'm curious, you say this is a great lesson in leadership and you give him credit for -- >> for phase one. >> for phase one. i'm curious when you saw some of his answers yesterday, were you satisfied, were you unsatisfied? would you have done it differently? would you have done it the same? >> i didn't watch yesterday. i watched the senate hearing.

i saw snippets this morning on the wall street journal where they gave him a little more hard time and he may have reacted a little more feistyily. >> there were questions for me, three days before the tempest in a tea pot comment, he knew they had lost $300 million. the second piece was if the volcker rule existed today in its current form, would it have affected this? he said i don't know, maybe, i'm not sure. if you were advising him, what was the right answer? was that the right answer? was it a different answer? >> he may not know. i mean, i think the one thing you can say about jamie, he's very, very candid. and they're still wrestling and with the volcker rule and what

is the volcker rule? it's vagaries beyond vagary. everybody i talk to doesn't know what it is. so i'm not sure that he could answer the second one. and the first one to me, $300 million in a multi-trillion dollar bank, come on. if they're telling him that's the cap of it, they're up $100 million daily. >> as a shareholder, the stock has always gotten hit. there was always the jamie premium. for a long time there was the jack premium at ge. will the premium come back? should there be a premium? >> it will come back if they perform. this is all about performance. premiums aren't based on jack or jamie. premiums are based on the team that delivers the numbers. we had a team that delivered quarter after quarter, year after year, 84 quarters, 21 years. delivered results.

that want jack delivering results. jamie has a reputation for building a great team that delivers results. it's all going to depend on the recovery and results. it's not about the characters at the top who get more credit they deserve or more blame that they deserve. >> you raised the issue you get credit on both side, the good and the bad. is it a good or bad thing for a company to have a ceo whose image is so part of the company? >> well, the thing you got to understand is that the ceo doesn't go out with an ambition to create that image. that image is created by people in the media one way or the other. have i never in my life called up and said could i have an interview? the interview always goes like this -- we're going to write the story. you can cooperate if you want or not. and i bet jamie has never picked up the foreign relations and

dialed "fortune," "business week," and said please come by, i'd like to tell but myself. that is a myth of build him up, shoot him down. i've been prince, i've been pig three cycles. i got out as a prince. i mean, luckily, i got out at the right moment. 9/11 was a week later. i could have been pig. this is all part of a cycle in the game. it's not unlike the economy we were talking about. there are cycles and the media create it creates it. >> you're absolutely right as somebody on the end calling for an interview. anyone who called and asked for an interview, you wouldn't write the story. the media picks who they want. >> why are you such a publicity hog? we work for big companies and big companies are where the

reporters go to write stories. that's enough of that. >> it's fascinating to hear from the other side because you're right, we're on the other side of the phone. >> and i would never take it from someone who was calling saying write about me. it would never happen. >> did what happened to jpmorgan, should it cause us to think that taxpayer money is definitely going to be involved again when one of these guys skews up? because that's why we're devilling into something what isn't that interesting or historically we couldn't have been doing this. is it raising the specter that we could have another issue of -- >> i'd much rather see us talking about what kind of capital levels should banks be required to have. i'd rather raise capital levels rather than have somebody in there -- they had a hundred guys in there watching them. that didn't do any good. >> that's the whole game. all the other stuff does

nothing. >> that's how i feel. more capital. >> i agree with you. >> 20% down on houses would have -- >> all these things. when wall street traded with their own money before they went public, these problems -- >> did you watch yesterday? i wish -- we probably should have cut this one. there's a congressman sherman who said, all right, mr. dimon, i'm going to swear you in now. and bachus said, whoa, whoa, whoa, you're not swearing him in. sherman said i need to swear him in because if i swear him in he's already perjured himself. bachus said when barney frank said no one is getting sworn in. and barney is so funny and he said i have a whole list of things i do, i'm going to seasoned you a list.

and bachus said take your time on sending it to me. but this guy said jamie was lying that they sent the money over to england to put in the casinos that should have been going to small to medium size businesses here. he said we didn't turn anyone down who needed a loan here. >> did you see the janitor thing? >> i saw some of it. >> there was a whole thing about the janitor. >> maxine was great. that was fun to watch. jamie was -- did you see where he said the moon -- >> if the moon hits the earth, maybe we're too big to fail if the moon hits the earth. >> former fed governor larry meyer of macro economic advisers and cnbc senior economics reporter steve liesman. i'm trying to think of what larry has been saying and what you have been saying.

larry, i think you have been more amenable to what we're seeing right now, the notion that maybe things weren't going well enough to rule out no further fed, you know, action and now i think maybe you were kind of right. it looks like all along we should have been keeping an open mind maybe. i don't know if steve was really of that mind. >> well, we hope we're right. we think we're right. >> have i mischaracterized what you said? you're ready for qe3 or another twist, aren't you? >> absolutely not. definitely not qe3. it's a question of threshold. we know the economy has deteriorated. does it pass the threshold? the cost of any balance sheet action is very high, even any form of operation twist. we think it will be lange raj in the policy paragraph, specifically the last line and it lab clear easing bias. they've gotten closer, they're ready but they're not prepared to act today.

>> what do you think, steve? you've been coming around a little bit, steve. you want us to write a big check to the french so they can retire early. but other than that, what are you feeling? >> el with, let me just caution the market. i've been thinking about what's happened to the conventional wisdom over the last several days. somehow this idea that the fed would extend operation twist has become conventional wisdom. we started talking about it on monday. it became the kind of cw on tuesday. i'm not saying we're responsible for it. the more i think about it, i come to the conclusion it's a logical guess more than a guess that's come from guidance. i think the key here is the market -- some of the guys are doing nothing, kind of like in the larry meyer camp where it's more talks than action. there's no actual guidance.

i think on bernanke's testimony, very much in the middle. >> are you suggesting, steve, that they might do nothing? >> i think nothing is a possibility. and having talked to larry this morning, i think it's a real possibility. remember the ecb meets on thursday. that's going to be a big thing. i just think the market should be prepared -- i had an economist call me yesterday and ask me dithink there was a hint about future fed policy from john hildergraph's story about people who couldn't get out of their mortgages. if that's the situation we're in, nobody has a clue. >> that's interesting, though, that idea makes sense wait and see what happens with the next numbers but the market is not anticipating that at this point. larry, how much does the market and the knee-jerk reaction play into what the fed may or may not do? do they care at this point? >> they're very cognizant of it,

they'll talk about it but eight min mi -- it's a minor fact. today we learned greece formed a coalition government. we're going to find out what the ecb does, we're going to find out what comes out of the eu summit and very importantly things get really bad, then i believe wooel see coordinated central bank action and the fed wants to be able to do as much as possible consistent with what other central banks are doing. >> so save it now, don't use your fire power if you realize you may have to come back very soon -- >> i hate that argument except for today. >> hey, becky? >> yeah. >> i think it's worth looking at what's happened over the intervening period. we had a peak in interest rates about march 23rd or so. since then the ten-year has come down about 70 basis points. the 30-year mortgage has come down about .4 and implied inflation has come down about .2

or .3. the question is how much of that if any, is in anticipation of fed policy. i did an interview with bill dudley at the end of may and he was very much suggesting no policy ambassador. would i submit a lot of the chang in interest rates has come amid no expectation for fed policy and i'm not sure any additional fed policy would do any good and i'm not sure bernanke would act in a case where he didn't think he would do much good. >> wow. >> steve, did you see -- how much do you know about robert kessler, steve? >> yes, i followed robert for a long time. he's one of the smaller guys out there on bonds. >> unbelievable. >> and interest rates. >> and i brought up -- i had to go back to when i was thinking he was crazy for the first time, we were in the old building at cnbc so it had to be eight least eight years, he was thinking the interest rate was 4%, 5% and he was pounding the table you got

to buy these. the consensus was it's as low as anyone is going to go, anyone who buys, it, you're going to get your head happened to you. and he was saying the same thing at 1.6% yesterday, steve. >> even i'm reluctant there. i was still bullish at 2.5. it depends on what your economic and growth outlook is. my take is the at the-year is more tied to what the outlook is for the economy than it is to fed policy. i believe fed policy had an impact at the margin, .2, .3, maybe .4 on the up side but more and more of the ten-year yield and other interest rates in the economy -- >> we're not japan but it did happen in japan, right? it can happen for 20 years, can't it? >> for me i think he is taking action to -- they've worked to

keep interest rates high rather than to loper interest rates. >> larry, i appreciate your time. i don't know whether i was saying you've been right bu i guess i kind of was. >> we'll find out very soon. >> catch our special coverage of the fed announcement right here on cnbc beginning at 12:15 eastern. cnbc will also carry ben bernanke's postmeeting news conference. special coverage begins at 2:00 p.m. we even have the helicopter as he's landing -- >> i didn't talk to that. >> these guys are suggesting we may get nothing today and i don't know ot sure if they're totally prepared. and we'll talk about interest rate, the fed, europe and much "squawk" will be right back.

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election. they don't have a new government yet. we expect one to happen in the next couple of hours, there's been a lot of wrangling behind the scenes, coalition building, blah, blah, blah. one of the ripple effects of the election has been the tax collection office says they have seen a 20% rise in the number of greeks filing their taxes. >> in two days? >> yeah, in two days. all of last week they said they had about 49,000 filers every day, never hit 50. on monday it went to 54,000 and yesterday there were three filings short of 58,000. so from 49,000 to 58,000. they think it's because the guy who many thought would win was promising to cut taxes and reduce all the higher taxes imposed and now that he didn't win, people started filing in a much greater fashion. >> whatever happened to that whole electricity thing?

remember they were going to shut off your electricity if they didn't pay your taxes? >> so they did impose that tax. they did do it through the electricity bill. they never actually shut down anybody's electricity. they never actually did that. but that did bring in a lot of revenue because they've never had a property tax before in greece that did very well in terms of financials. the one thing is that it took a lot of paperwork to get that thing through so that delayed the tax office getting the income tax bills out the door but now they're getting up to speed on that as well. if you live on greece collectively the income tax bill for greece last year was 1 billion euros on salaried people in the country. this year the collective tax bill on salaried people will be 5 billion euros. it's gone up five fold. >> how do you collect it when people aren't paying -- >> therein lies the problem. when i say salaried people,

those are people who cannot avoid it. they work for a company, it's entrepreneurs, plumbers, lawyers, doctors, whoever runs their own business is far more likely to evade their taxes and it puts much more of a burden on the working people. >> michelle, thanks for that. are you over in athens? >> i'm still there but headed to madrid. >> you're making a gregsit and headed to the spannic for the greek end. >> we'll take it. a lot more coming up. thanks, michelle. we have lots more coming up from our guest host jack welch. coming up we have peter fisher and massachusetts governor deval patrick.

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welcome back, everybody. let's get thoughts from our guest host jack welch today. jack, you talked about the economy and some of the slowdowns we've seen around the globe. if people weren't tuned in at the top of of the 8 or if they weren't paying close attention, you talked about in the last four weeks a serious slowdown in orders going up 4% to 6% to flat to down 5%. that sounds like a stunning -- >> in northern europe. >> in northern europe. >> southern europe had been weak all year but germany, for

example, was holding up until the last four, five weeks. in the number of our businesses. >> we've heard the same thing from a few ceos. >> it's not ge talking. i have no idea of ge. >> we've heard from ceos who have come in and talked about the same thing, david cote have honeywell. other who is haven't seen it said it's only a matter of time, that they are waiting for some of the eastern european countries they do business in to really slow down. my question is what kind of impacts will that have on the united states as someone who has watched this happen before? >> exports are clearly going to be impacted but we've got some momentum here that's real. i mean, we've got lower gas prices, which is a wonderful tax cut and housing is going to pick up. so in the u.s. i think we can hold our own in the 2% range, which is not enough to get a labor recovery but we're not going to have, in my opinion, a

recession. but the real thing that's troubling right now is we were talking about the bricks. the bricks are really bricks right now. they're all down in the bottom. i mean, india is just in terrible shape. wages are going up 20% in india and industrial production is flat. so here's a country that was just rolling along that's getting whacked. might have a gdp number from services and exports of technology in the 3% range. things are really slowing around the world. there's no question. but i don't think operation twist is doing such a problem. >> more with jack momentarily. we're just about 90 minutes away from the opening bell. we'll check on the markets next. and blackrock's peter fisher will join us to talk about the economy, the fed and your money.

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much more from the master of management.

one hour with jack welch. >> squawk market master peter fisher thinks the fed is gearing up for a policy change. >> and the supreme court's decision on health care expected before the end of the month. massachusetts governor deval patrick will join us to talk about the biotech boom in his state. the third hour of "squawk" starts right now. ♪ back to massachusetts to your golden age ♪ welcome back to "squawk box" here on cnbc first in business worldwide. i'm joe kernen along with becky quick and andrew ross sorkin. our guest host is jack welch, author of "winning" and "straight from the gut." much more from jack ahead. i'm going to pencil you in for

kudlow with me tonight at 7 p.m., you'll be done by 8:00. jack will be guest hosting tonight. >> i don't think i'll make it tonight but i'll make it sometimes, joe. >> very good. news out of greece this morning. greek socialist party leader, it almost looks like a country. venizelos says greece has formed a coalition gifovernment. >> and operation twist lets the central bank sell shorter term securities and buy longer term bonds. former fed government randy grossner spoke to us about his

expectations. >> what might make sense is to extend them a bit rather than have them fall off a cliff. it gives them time to see where things are going. >> ben bernanke will hold a press conference at 2:00 eastern. >> the dow looks like it would open up about 13 points higher, nasdaq and s&p also up up but it's all along the margins. in corporate news, procter & gamble lowering current quarter earnings guidance. it's below the street view of 82 cents this sales expectations are now also being lowered. among the reasons, and we talked about it earlier, slower growth in china and tough markets in europe but the company is also blaming a strong dollar and

higher commodity costs. pepsi, bir the way, saying it's saying it's seeing unfavorable, change rates hurting profits. the company is forecasting foreign exchange translation to hurt core earnings by about 3 percentage points. >> all right. he is a squawk market master in charge of $1.2 trillion in assets on his radar today. the federal reserve's decision on interest rates. peter fisher is the global head of fixed income for blackrock. peter, it's good to see you. >> good to be here. >> we've been trying to figure out what the fed will do. steve liesman and larry meyer raised the idea the fed might be nothing. conventional wisdom has been they would extend twags twist. what's your thought on, a, what the fed should do and, b, what the effectiveness of any of these measures might be? >> i agree with them. i'd like to see the fed stand pat. i think they're more likely to

do an operation twist but i think they should sit still here. if you go back and look at what bernanke said in february and his testimony then, he expected the u.s. economy to slow down in the first half of this year compared to the second half of last year and it did. he expected the labor market would give back some of its gains, that they were one off improvement and not likely to be sustained and that's exactly what happened. he expected inflation to come down a little bit. it's just what's happened. he actually deserves a a little bit of a victory lap in terms of their forecasting and now they should stand pat but keep the balance sheet the same same size. i think they're likely to do a little twist. >> if that's the situation, though, how effective is it? >> i don't think it has much more room to be effected.

if they keep taking long-term treasuries out of the market, they're denying the banking system the best collateral in the banking system. that doesn't help stimulate private credit. so the trade-off between lowering long-term rates and sucking treasuries out of the market looks to me to be not producing returns for them anymore. that's one reason i'd stand pat. i don't think it's working. >> does the fed have any other bullets that it can use or is it running really short on what it can do and its effectiveness? maybe it's done everything it possibly could. >> monetary policy principally works through changing our expectations so they got to shock us. they got to do something we don't expect. they could balloon their balance sheet, double the size it have. we're not expecting that. that could change our expectations. but short of something really big, that's what's hard. it's hard to keep shocking our expectation when is they've done so many things over the last few years. >> shock and awe, i don't know what you could do to put us into

shock and awe at this point and if you dp d take measures, a qe3, you'd get a huge backlash, wouldn't you? >> i'm not sure it works. they'd have to figure out what as tote buy. foreign currency is the only one they're legal lie li authorized to do other than treasuries and mortgages. if they tried to weaken the dollar, i don't think the rest of the world lets us get away with that. we would have a real currency war. i think you can theoretically talk about radical expansion of the battle sheet. i'm not sure it would work in practice. >> robert kessler is here yesterday. he thinks it's a great time to buy treasuries where -- i noe that you have not been thinking along those lines but is there an argument to be made there? >> well, buying treasuries now or buying bunds now at these

very low yields is not a return play, eight safety play, it's a preservation of capital play. you're thinking rates aren't going to back up soon, i'll put it in a free asset and so that's the argument for trying treasuries now. if there are really bad outcomes in the world, we might rally further. a lot of that is already priced in. >> people aren't stupid. they know if they buy a ten year and rates back up, they can't just park it there and then wait around and decide to buy something better six months from now. they don't get their principle out for what they put in. so they are consciously taking the risk that talked about. someone is deciding that getting a return in principle is the most important thing right now. it's weird that people say, well, you are know, we know

they're going up. like anyone who is doing it must be out of their gourd. people seem to understand what they're doing and they're still buying these things. >> well, i don't know that they're going up. they may go side ways. that's one reason it's so important that the fed have been mayor that's pretty powerful signaling that they are not about to back up. i don't think they're about o back up. you may not get a great coupon here but you're going to get presidential factors and signals when and if they're going to chang that forecast. >> what would you be telling people to do? you haven't been saying double down on bonds but what would you tell people to do ahead of them or later today? >> i think whether we're going to get more fear or loather, i

i'd be telling investors look past the fed meeting and be positioned for big fat tails in europe on thursday and friday. there's some announcements this week. the next ten days are going to be rich with news coming out of europe. they ka really get it right here and announce that merkel and hollande and draghi will stand behind the hundred biggest banks in europe, they'll get europe to figure out the details. they could make that look very persuasionive or they could try to hold a press con fence like that and it would back fire and then we'd not be in a good place. so that's a much bigger deal in the markets oaf the next two weeks. >> if things go south, would you then tell people it be buy risk

assets, high yield, investment grade credit and it looks they're going to avoid -- we're in a much better place now than we were two weeks ago in europe so sop of this is starting to get priced in. if they actually pull this off for the summer, i think markets could have a really good rally and you'd want to be positioned in risk assets. >> and get the heck out of the bonds? >> i don't think rates are going to back up that bad given the fed's decision. so we might be a little short on duration and interest rate outlook but i think the world economy as you've been talking about with jack. i think we might all come back in the fall and realize, gee, the world economy is pretty

slow. >> peter, thank you for joining us today. >> my pleasure. thank you for having me. >> the fed will release its statement at 12:30 today. you can watch ben bernanke's postconference at 2:00 coming up here on cnbc. >> massachusetts governor deval patrick will join us next to talk health care, job growth and the economy. >> if you think you've heard the best "squawk box" has to offer, you don't know jack. >> it's not jobs? that was out you put out the fire? >> i'm going there. stop it. >> much more from guest host jack welch still ahead. [ male announcer ] aggressive styling. a more fuel-efficient turbocharged engine. and a completely redesigned interior. ♪ the 2012 c-class with over 2,000 refinements.

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welcome back to "squawk box." here is massachusetts governor deval patrick. governor, thank you for joining us. >> thank you, joe, for having me. >> i want to try to figure out what is the secret here. there are other place, the research triangle does pretty well with biotech and obviously the san francisco area.

do you have some pretty good institutions of higher learning up there. >> we do, we do. >> but what can the state itself do just to culture this industry in terms of of laws or tax breaks for subsidies or whatever? >> well, mostly this is about playing to our strength, joe. we have nearly 300 great colleges and universities within an hour and a half of where i'm sitting right now in downtown boston. we have a well educated workforce, lots of teaching hospitals, research institutions, well developed venture capital community and the state is not about trying to substitute for the private sector but really plug in some holes. in the valley of death so-called between proof of concept and where the vcs are really ready to participate. we can do small grants to help that researcher stay alive so that they progress into and get themselves better positioned to move on to product development and so on. and those sorts of things, tax

breaks here and there very targeted, very science based, have made a huge difference. also promoting this sector, which we've done very actively and is one of the reasons we're growing jobs better than other states did. >> governor, you have benefited from europe and a lot of innovation and especially in life sciences has not been able to flourish over there to some extent because of the way they set prices on new drugs in europe. i know that you're still -- do you want to address that actually? >> it's an interesting point. what we've seen in various markets where we've done trade missions is that there's actually quite a lot of basic science and science related i innovation happening but the commercialization isn't as robust -- >> why not? hopefully we can learn something about what we finally do with --

i don't know what's going to happen, we might find out next monday on the affordable care act. romneycare. i don't know which are pejoratives and which aren't -- >> whatever it, is it's done a lot of good here. it's very popular, too. >> you've got something that you think is working. can we learn anything about what happened in europe about the commercialization? we had been leading the way in this country on the new frontier for new drugs. there's a reason innovation has been stunted over there. it's not some of the things we're seeing in health care? >> well, i'm not sure that it's all about pricing. i mean, do you hear that from pharma. some of it is cultural, though, joe. you go to a place like israel which has a deep innovative culture but not markets.

they're in a neighborhood where the markets are not very friendly and they're quite constrained. they are looking for partnerships with massachusetts and other places in the world so they can expand markets. >> maybe we can't glean anything from it. i'm trying to tie innovation to the private sector to some extent. i think you've toed the line a little built better maybe in massachusetts than we've seen in other parts of the world. >> well, i feel very, very strongly that as i said earlier -- we're not looking to have government substitute for the private sector but we do see that line between the public and the private is less and less hard over time. there's a real collaboration between what we're trying to do in government and what the private sector is trying to do and our role, our investment strategy and growth strategy is about education, innovation and infrastructure. we invest in schools because that's how we prepare the workforce, we invest in innovation in these sectors that

really do require a special sensitivity that need the concentration of brain power, life sciences and biotech is one, i.t., financial services is more and more an i.t. business. and we invest in infrastructure because i describe that as the unglamorous role of governing but it supports everything else. so there is a role for government. we're very targeted, we're very disciplined and we're growing now twice as fast as the national growth rate and we want to keep that going. >> do you remember the nickname for your state? when i lived there they called it taxachussetts. with the national average where are you? and why don't people leave? >> thank you for giving me the chance to say we've cut corporate taxes. we're right in the middle of the

pack. we're very competitive and we have a range of incentives that make us even more so where we're targeted to play to those strengths. i think there's a big part of this job which is not just about policy, it's about promoting, marketing, talking to the -- i've spent most of my career in private sector experience, you have to get out, introduce yourself to people and make them feel comfortable. >> we have to thank him a little bit. >> we do. >> governor patrick and have i had a couple of conversations over the years with political differences in a friendly way but i was pleased to see him jump on the bain comment and come to the support of bain during that debate. so thanks. >> jack, is that you? >> yes! >> nice to hear your voice. >> nice to see you. >> yeah, i don't think those issues were ever about the company itself.

it's really about the record of governor romney in job creation and there is a difference. and, jack, you'd understand this, between creating wealth and creating jobs. and the one isn't evil. the question is whether it's relevant to his preparation for the presidency. >> no, i understand that but it was nice of you to come out and support bain during that argument. >> sure. >> there's a lot of things that go into job creation i guess, too. i guess romney at that point, governor, there was a bit of a tech bubble show down. you know how route 128 has a lot of technology. that was like at the turn of -- at 2000 and a little bit after that, right? you would have to say that job creation record of the last three and a half years isn't that awesome to ron on either, right? >> i'd say the job creation record -- >> not in massachusetts. you wouldn't run on that.

i'd almost rather run on the romney record. i hope we don't look at the record on job creation or we're really going to have a problem, your guy. >> we've been doing great things in massachusetts. i'm very proud of the job creation effort. the strategy of investing in innovation and education and infrastructure is the same strategy the president has had. ear in massachusetts the legislatures gives me the tools i ask for. the president hasn't been like that. >> you couldn't just leave it with bain is a good company. governor, as always, i appreciate it. good to see you. >> thanks for having me. >> you're welcome. >> when we come back, much more to come from our guest host today, jack welch. plus we have the story lighting up the newswires.

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welcome back to "squawk box," everybody. burger king returning to the public markets today. it's going to begin trading on the new york stock exchange under the ticket bkw. this all comes after the consummation of that previously announced deal in which 3g

capital sold a minority to london's justice holdings. >> coming up more with our guest most jack welch and a view on the housing secretator coming u after the break. k. [ male announcer ] trophies and awards lift you up.

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welcome back to "squawk box." we are watching the spares of p & g today. with the stock now down about 1.40 or so, 1.30. i guess you'll see this in other global consumer product companies, don't you think? >> they'll be penalized for being the first one out with this but you'll see more than this. >> it has to do with currency. the last time we did talk about in certain competitive markets they had to become more competitive. that means prices in certain areas had to come down to remain competitive. the unit sales would be the same but the revenue would suffer. >> as companies have globalized over the last five years and the

global markets are now slowing significantly, you're going to start to see stories like this. you have to. >> and the global markets -- >> the global market is really weak. >> that was the whole point of our earlier discussion. this is a global this evening. this is just one check mark that says maybe we're going to see more it have. >> our guest host has been jack welch all morning. i wand to talk to but this op-ed called "wasting warren buffett." i should read a bit of it if we could. this is on the buffalo rule. he says "the man had no chance of passing, would have only made a small dent in the deficit and was rightly dekraaied by experts as gimmick that only diverted attention from what we really need, comprehensive tax reform that can substantially raise

revenue in a fairer manner. the buffett rule has largely faded away. what a waste of warren buffett. and a reader -- this is about obama after reading the column. "we thought we were getting apple -- something users really get enthusiastic about -- but instead we got microsoft. lots of bugs and we wonder whether the folks in washington can ever get the software to run properly and we stuck with the hardware and we have to simply hope the obama 2.0 upgrade will work. your thoughts? >> i think calling the buffett rule a gimmick is clearly right on. that's all it was. it wasn't going to change the game. it's another part of the enemy list, the drug companies, the insurance companies, the

congress, the rich. >> why do you think he went along with it? >> i don't know if he thousand about it a lot. i'm not sure how much choice he had to go along with it. i think once the political guys got ahold of it, sounded good. it's another enemies list. they even went after the supreme court in a joint session of congress he's yelling at the supreme court. they pick an enemy every day. so the idea they got wealthy as the enemy and the fairness argument and all that stuff -- >> the second one irritated me. what do you make of the thing we read about maybe the 2.0 upgrade would work? both software programs were written to redistribute wealth. if the software is flawed for what its whole purpose is -- what about the second one? what did you make about the second one? i didn't know what that meant. >> that was clever by one half for me. >> i don't know what it means. >> i wanted to change topics to something you addressed in terms

of big global businesses and one of the issues, we talk a lot about too big to fail but recently you hear this phrase "too big to manage." how can you actually manage a large, massive scale organization in an age when everything is getting bigger and bigger, how much harder is it going to become? you ran the biggest. >> it's all about great people. it's all about hiring great people, spending millions and millions a year on training. it's all about getting the right players on the field in the right places. >> is there any argument these days that things could become too big to manage? >> no, i don't believe that. i believe a competent management with a competent process that puts good leaders all over the place can handle it. and scale is a big benefit. when you have scale, can you invest more, get more talent. >> how much more challenging does it make it for you, the ceo of a company to actually know what's going on in the 25 or 20

or 30 countries you're managing and the thousands of products. this is the argument, right? >> it's a silly argument. if you have an operating system, all it is is a number of zeros. if you have the right system where you have a flow of reviews and a flow of accounting systems, it not you managing. people are giving you information. people aren't hiding -- if openness, if candor are values of the company, that's what people get promoted on, bringing up problems, not hiding problems. it's a cultural issue. too big to fail is because you didn't get big managers and big leaders to run the operation. management -- good management can manage any size. it's just a zero. the problems in the small companies are as big as they are in a big company. >> steve liesman is in d.c. for this fed action today. he has a question for you, sir. steve. >> hey, andrew, thanks.

i want to go back to talk about the fiscal cliff and see if i could engage jack's management expertise. you're in a negotiation now. you got one side that says there's no way we're going to make a deal on the fiscal cliff without raising taxes and the other side says we have to raise taxes -- we will never go for raising taxes here. two opposite positions and then hanging in the balance is the u.s. economy that everybody says is going to fall off a cliff. how do you solve this problem, jack? i know what you think ideologically but what's the negotiating tactic here? >> i think people of goodwill have got to come together and recognize that we have the cliff there and then deal with it. this is nothing more than a political issue. if you were running a company, you would sit there and you would say, jack welch, you don't get social security anymore. tough luck, you paid into it but you're well off. your medicare payments, jack,

aren't going to go up and you're not going to get that benefit and you whack me right out of the barrel. then you say but in fairness everybody's going to pay some taxes. everybody's going to have some skin in the game. you're not going to have half the country not paying taxes. and we're going to redo the tax code, which bowles-simpson wanted to do. we're going to get rid of loopholes and lower the rates and everybody's going to play. we're going to give real benefits to those who need it. the safety net is going to be real for people who need it, not people who game it. and we're going to sit down and make those decisions in a room. >> the real question is will your -- well, i'm sorry, i misspoke. not your side -- >> joe, you think that affects me, joe. it just bounces right off. >> i know. >> it bothers andrew. andrew is probably -- >> here's my question. when he said is it going to be

enough -- he i thought made an eloquent statement of what we should do but it included the word lower overall rates. is that going to be acceptable to the other side if they don't just somehow get higher rates on rich people, higher marginal rates? that seems to be the holy grail. >> i think it is. >> we got to go back to the clinton years of higher marginal rates on the rich. >> i will say one thing, most economists believe solving the deficit will involve some form of higher revenues. >> maybe it goes up from a lower base if you get rid of the loopholes, maybe the revenue numbers -- maybe the marginal rate. but they want marginal rates to go up. they don't care even if you get more revenue -- >> well, i'll tell you what the obama administration's point of view is on this. you have to have sacrifice. where does the sacrifice come

from in the majority? they say it should come from those that are most able to bear it. you shouldn't be cutting food stamps and unemployment insurance. >> steve, i just gave you sacrifice. i just gave you my social security. i want to pay more for medicare for my health care i don't want o get benefits from the government. i shouldn't. but you think the marginal income tax rate ought to remain at the 35% from the bush era or should go down from that? >> i think it should go down and we should take out loopholes and we'll get more revenue and more growth in my mind. since simpson and bowles talked that way -- >> steve, you know how much if you raise it on 250 and above back to the clinton -- you are know what it brings in? >> you got to get everybody in the game. >> it's just almost a -- >> but it's thought of, joe, as

being part of the solution, right? >> what does that mean? it's thought of by whom? it solves 5% of our problems. >> 5% is 5%. you don't have to solve on the spending side if you do this that way. i like the way jack is talking everything has to give get to get there. i'm sure in this political verne nobody has any incentive to get anything done and i think that's affecting the market right now and i ask this in context of the federal because the other negotiation is between bern ski and the congress. does that take congress off the hook from doing what it needs to do to solve the economic problems? >> i don't think so. i think what bernanke does today will mean nothing. >> okay. >> steve, there's a whole group on the left that are still mad at the president for that first

compromise. and it wouldn't have raised much money, wouldn't have made any different in a year or two, it was only a one-year extension. it was chum of chang. they're beside themselves because you didn't stick it to the rich people. >> i just want to get where we need to go and that's solving this fiscal problem. >> jack told me. you can have my medicare and social security, too, and i'm not jack welch, believe me. >> you're bigger. more hair. >> that's it. i got more hair. that's it. that's all i got. a little taller. >> all right. guys, thank you very much. we're going to have more from jack in just a moment. when we come back, a new economic forecast with a rosie outlook for growth. but bad news right after this. ♪

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welcome back, everybody. new forecast numbers today from ucla on the housing recovery and u.s. economic growth. our jane wells joins us now and she has more on that. >> hi, becky. the ucla anderson forecast is telling us we're going to have to be patient. we may own be like halfway through the recovery. the gap between where we are and where we should be is getting larger, not smaller. this closely watched forecast predicts gdp growth this year of 2.2%, which is a little higher than some have, growing to 2.4% next year. it says corporate profits will fall in 2014. unemployment should fall to 7.7% by the end of next year but

america's economic problem is the lack of parkfrz development. foreclosures have peaked but $1 trillion in student loan debt could keep potential buyers out of the market, quote, for years to come. housing has not bottomed in california. the state will continue to lag and the high speed rail project will not predict the economic boom the governor predicts. still it sees unemployment coming down, gdp inching up. it's just going to about four times longer to return to normal. >> sthe reason they're saying this is because the inferior education system is part. it's something we were discussing off camera with jack

welch. it's a huge problem. if you can't train people and get them the skills they need, you're going to watch it in the unemployment number. if you don't have a high school diploma, it's upwards of 16% in terms of unemployment right now. >> it's not a question of throwing more money at the problem. it's a question of dealing with unionization. not teachers. we have great teachers in many places but we can't have that union superstructure. look at indiana and wisconsin. the big story in the restructuring of mitch, daniels and walker is education is getting more money and the unions, people are dropping out of the union. half the people dropped out of the union in wisconsin because -- >> because there weren't mandatory dues anymore. >> no mandatory dues. look at new york state what we read every day when we pick up the paper. >> you see that union lobbying money -- >> every day union power owning

politicians as problem. look at indiana. it's a great story. wisconsin is a great story. they're really. the biggest beneficiaries of these restructurings in these two states has been education. the biggest beneficiary. that's what we have -- >> is it showing up in the test results? >> not yet. but it shows up in class size, in the number of teachers, in the amount of money that's been put in. mitch daniels now has the highest percent of his revenues going to education than any other state in the country. >> you've read it -- >> it's amazing. >> in new york i've read it and i've watched, it looks like we're going to have these teacher evaluations. then cuomo will say i'm not sure we should be evaluating teachers. we don't do it with firemen and police. and they start backtracking. it's almost impossible to even

esituate them to krid of the first -- >> i worked in that system. i was there for five years. it horrible. >> it's the influence of the union leadership. >> look at the number of pages that you have to go through to remove a bad teacher. you have ever seen that? there's a stack of paper. it's incredible. >> but you can't talk about it. you are but you really can't. >> i want to go back to the transformations in indiana and in wisconsin that are real, we can look at them, we can look at the results of indiana now. i don't know the test scores, we ought to find that out. but indiana is a story that if hold krs the country, we would deal with the education problem. >> caller: and edward, the director of ucla's anderson success to think of something taking seven to eight years to

come back from this, i don't know what that means for unemployment by we were talking about some of the root causes and i wonder how you think this can be fixed. >> i think we have to recognize as a nation we're experiencing two very deep structural adjustment. one that you talked about in a way about the deficit. we're transitioning from a spending society to a saving society. we made very little progress with regard to that and that still is pretty much yet to come. but the thing that we've neglected complete i in the public debate is we're also experiencing a transition to a post industrial society. it the teachers that create the jobs. they're the ones who prepare stude student -- frankly we've had a weakness in our educational system masked by two bubbles. first the internet bubble and then the housing bubble. there's no bubble that's going

to mask it. the reality is the assets -- these intellectual assets take a long time to create. >> and what is your solution to this, sir? >> well, my view is that we as a nation just have to sort of suck it up and realize there east no quick fix. monetary policy has proven itself to be ineffective. we've had incredibly aggressive envelope. >> i'm talking about the teachers. what is the solution there? >> i heard jack welch's opinion about the unions and i think that's correct. but it's fundamentally the parents. we need the parents actively involved in the education system. if they're actively involved, i think you'll see the teachers respond, even if the unions are still stumbling along. as an educator, there's nothing better than affecting some student's as life. i think most teachers feel that

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box." jim and david join us now. a lot of times, cramer, i feel like i know what you're thinking. i don't know if i do now, but the way your brain works, i see this work from procter & gamble, i'm wondering, your charitiable trust, who else would be dealing with the same things here? have you thought about that? >> well, look, procter & gamble is a breakup candidate. we've seen time and again these companies that have basically run out of gas start thinking maybe we should do a merge and growth or maybe the regular economy. there's a buy that runs it, by the name of bob mcdonald, and he's oblivious. i joke about it with david, in the conference call they say, what are you doing? >> oblivious is a rough word. he's oblivious? did you just say that? >> ron johnson is oblivious. you didn't have any problem with that at j.c. penney. it's all right.

it's not a mean thing -- >> so, jim, you're not looking at clorox, there aren't a whole list -- >> my charitable trust does own that. i think the raw costs are coming down. it is a domestic play that hasn't focused on international. in colgate said 11 out of 13 categories they were taking shares from protecter. you have to meld the problems with protecter with the solution that colgate. colgate is a better company than protecter. i never thoug problem tore. >> all these thing just flow out. i didn't know how to take the p & g news. you think it's execution at this

exude? >> they used to be the big inventor. i want to hear from jack welch. this company has fallen behind unilever in terms of r&d, falled behind colgate, a shadow of its former self. jack, how does it happen so quickly? >> jim, i'm not familiar wiprocr & gamble. if you take your eye off the ball and start running the place as a bureaucracy rather than a high-in entrepreneurial place, that can happen. >> and i think that's the story here. it's a sad story. it's a great american company. you are a striking couple down there. >> they really slashed the r&d budget, though, jim? hey, jim? >> yes. >> sorry, we were having a moment. >> that was good.

>> the habitat for pro-manity down here. i like it. can umming up -- tomorrow, crisis in europe, the american recovery and the unemployment problem. guest host ed lazear will tackle the issues. former chairman of george w. bush's council of economic advisers. plus the best of the best. we'll bring you interviews with the top fund managers from the morningstar investment conference. don't miss "squawk box" tomorrow at ♪

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our thanks to jack welch to join us. we only have 30 seconds. you can't really say anything, except will you watch kudlow if i'm on the show with newt gingrich? >> i will, if you will talk about the hidden obama, the most important story. the romney campaign should just print this story up, it was in the "wall street journal" on saturday. >>re